We’ve been travelling across different startup ecosystems in the past few months, and we made our first stop in Hungary. Our local guide today is Veronika Pistyur, the CEO of Bridge Budapest and a General Partner at Oktogon Ventures.
Veronika is a skilled community leader with an educational background in journalism and television and one of the early pioneers in the local ecosystem.
Veronika joined the Hungarian ecosystem in 2011, in a pretty early stage. She started mentoring startups at Telekom’s Kitchen Budapest incubator program while working with Prezi as an external communication advisor.
Veronika and Prezi’s co-founders launched Bridge Budapest Association and Ustream (now IBM Budapest Lab) to boost the ecosystem by connecting mainstream audiences with their (by then) tiny ecosystem. As a skilled journalist with a vast experience in television, Veronika started telling the stories of local startups, which is how her adventure in the ecosystem-builder life began.
In the initial days at Bridge Budapest Association, Veronika and its team focused on showing the entrepreneurship way to local students through a fully-financed fellowship program and direct interaction with local ecosystems from Silicon Valley, San Francisco, and Boston. The idea behind the program was for people to see it’s possible to build a successful startup from a simple idea.
“We knew this journey it’s more complex, and it will be challenging to convince enough people to trust us and jump in. However, we still wanted to make it happen.
A few years later, Bridge Budapest turned from an influencing startup mindset to conscious business culture and a value-based business community. The association is now developing with legacy leaders for whom it matters what they leave behind."
To continue their mission, Veronika and her team also launched Bridge Institute as an educational organization for legacy research to support their goals: to turn into action the emotional, intellectual, and financial capability of leaders and shape what we leave behind for the next generations.
“We face turbulent times, substantial global challenges, and need a new mindset to cope with it. That’s especially true for leadership.
We need leaders who see beyond their own personal agenda and look at the good of others. We call them legacy leaders.”
Veronika wasn’t alone in those early days and was lucky enough to find other passionate partners who would support the local ecosystem. Csongor Bias (Managing Director at Startup Hungary) and Gyula Feher (co-founder of Ustream), among many other players in the local startup community, helped shape it into the thriving ecosystem we see today.
Gyula sold Ustream to IBM in 2016, which brought a sample of success in Hungary’s startup history, showing the people it’s possible. This was one of the earliest moments they decided to invest in tech startups. So, Veronika and Gyula launched, back in 2019, Oktogon Ventures, an early-stage investment company focused on finding the next high-growth tech startups from Central and Eastern Europe.
“We leverage our local background, operational expertise, and global network to help CEE startups realize their fullest potential.”
Hungary reported +1,500 startups and scale-ups this year, supported by a community of +140 investors. Those headquartered in the beautiful country of Eastern Europe are counting a combined value of €2.4B in 2022, up from €584M five years ago.
_“Eastern Europe needs more time to become a Silicon Valley. _
After ten years of work supporting the ecosystem, we realized we thought it would be easier and that we’ll see the effects of our work much faster. We dream of unicorns and Skype-size success stories. However, we’re not there yet.
More people have ideas and are willing to take the risk of building a business, but it takes time. Some get confused, and some need more guidance on the right finance approach.
We are learning to cooperate cross-border because it is not a strength of our society. I am optimistic that this is changing, and more people will realize the power of supporting each other. Dialogues will speed up, ideas will fly, and innovation will happen. This will create new opportunities for other community players to find ways to support the local founders.”
The ecosystem is defined by a reasonably low ratio of Series A-ready startups. According to the Hungarian Startup Report, less than 10% have >1M ARR and a min. of 5% monthly growth rate. Furthermore, most startups start by focusing on the local market and just plan to expand later; however, most successful scale-ups focus early on the international markets.
The angel scene is relatively immature and small.
“There are only a couple of active angels, represented by exited entrepreneurs who occasionally invest in other startups.
We rarely find full-time or professional angels, and those who become one quickly shift towards venture capital. One of those cases was Gyula Feher, my partner who decided to move from angel investing to venture capital, so we founded Oktogon Ventures.”
Some of the most notable angels in the Hungarian ecosystem are:
Besides the community of angel investors, there is HUNBAN — a local angel network who have been active for the past 5 years. HUNBAN focuses on attracting people from traditional industries to angel investing. Its mission is to educate them about all the opportunities in the startup world and help them find potential deals. HUNBAN is run by Peter Csillag, the co-founder of Starschema, a recently acquired startup.
Local family offices are risk averse and avoid investing in PE and VC.
“This attitude of the family offices makes it challenging to raise private funds. The macro trends don’t support the change.
Unfortunately, there are not too many private VC funds. +90% are fully or partially backed by the local government or through resources coming from the EU. Hungary uses a record-high amount of public money to support European startups, on par with Poland.”
Veronika also shared that many local VC funds have been created in different editions of the JEREMIE program. For example, in 2017, Hiventures - one of the most active fully-led governmental VC funds - started its operations through this program.
“The downside of public funding is that the money comes with various strings attached. When many regulations are attached, the process becomes less founder-friendly, and usually, the process has a lot of bureaucratic overhead.
The performance of the public VCs is often measured by the number of investments, sometimes focusing on executing the volume of investments. Some of those cases end up with a questionable portfolio, having an ambivalent impact on the market, and spreading misleading experiences among startups.”
On the other side, when we talk about private venture capital funds, there are a few notable mentions, such as Day One Capital, PortfoLion, EuroVentures, and others. Most of these VCs follow global standards, co-invest with regional and European players, and focus on building an international network.
“Private venture funds are looking for Seed and Series A rounds.
At the same time, they keep their eyes on pre-seed rounds because some international investors are increasingly interested in finding the best Seed and Series A startups.”
In 2021, the Hungarian Startup Report found out that 1/3 of the startups thought they would be able to get financed by global VC in the next 12 months, but only a couple were able to do so.
“Hungary is a few steps behind if you compare it with other regional hubs. Only a few private VCs make consistent efforts to build a network of international co-investors.
Although many startups plan to raise money from international VCs, only the best can do that.“
Veronika also shared with us some of the most notable international investments that powered the local success stories in the second wave of local startups.
It is common for entrepreneurs to reach a point when they need help with their go-to-market strategies, marketing, and sales, especially when scaling their startup to broader markets.
However, we wanted to find out from Veronika if something is missing in the Hungarian ecosystem and how local investors could help founders succeed beyond bringing the capital to the table.
“I think founders need first-hand experience for building high-growth businesses and a strong network of domain experts to learn from. Hungary has strong potential in the R&D field but lacks business skills and experience.
More entrepreneurs reached an exit with their businesses and are now giving back to the community. This is a huge advantage for us, preparing the road for the next generations of entrepreneurs. However, we are not there yet.
Budapest is a shiny destination, the country's capital, with beautiful places to visit. Still, few others know it also offers affordable living costs and other advantages for founders who can run a successful business here. We had people who decided to stay and take risks, and others who studied abroad launched a company there and came back to open development centers.
These founders import deep and fundamental knowledge into the local ecosystem, alongside a great global network.”
VCs are an active part of the startup community.
“Our community of local investors actively engages with the local meetup and startup scene, facilitating various opportunities.
For example, Startup Hungary — the local startup organization, is backed by some of the most successful private VCs and other ecosystem-builder entities, like Google, IVSZ, and Design Terminal. This kind of support coming from people or organizations have a remarkable role in shaping our tiny ecosystem. Forbes Hungary is also a powerful storyteller partner in building and growing the ecosystem.”
According to the Hungarian Startup Report 2021, COVID affected startups more positively than negatively as it accelerated things like e-commerce adoption and digital transformation.
“The war and economic downturn impacted the whole economy, and it’s difficult to foresee its impact on the startup ecosystem.
If we are lucky, we’ll see more opportunities come from more experienced people. Those startups overcoming challenges and attracting the attention of international investors in more mature rounds will achieve the desired growth and exits.”
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